Earnings Per Share

Net income (loss) per basic common share is computed using the weighted average number of common shares outstanding during the period. Net income (loss) per diluted common share is computed using the weighted average number of common shares and potential dilutive common shares outstanding during the period. See Note 1 – The Company and Summary of Significant Accounting Policies for additional information.

PSUs and market-based RSUs and stock options that would be issuable if the end of the reporting period were the end of the vesting period, if the result would be dilutive, are assumed to be outstanding for purposes of determining net income (loss) per diluted common share as of the later of the beginning of the period or the grant date. Accordingly, PSUs, which vested on various dates during the years ended December 31, 2018, 2017, and 2016 based on achievement of specified performance criteria related to revenue, cash flows from operating activities, and non-GAAP operating income targets; and performance-based stock options, which vested during the year ended December 31, 2016 based on achievement of specified targets related to non-GAAP return on equity, are included in the determination of net income (loss) per diluted common share as of the beginning of each respective year.

Basic and diluted earnings per share are reconciled as follows (in thousands, except for per share amounts):



	Year Ended December 31,
	2018			2017			2016
Basic net income (loss) per share:
Net income (loss) available to common shareholders	$	(971	)	$	(15,345	)	$	44,949
Weighted average common shares outstanding	44,429			46,281			46,900
Basic net income (loss) per share	$	(0.02	)	$	(0.33	)	$	0.96
Diluted net income (loss) per share:
Net income (loss) available to common shareholders	$	(971	)	$	(15,345	)	$	44,949
Weighted average common shares outstanding	44,429			46,281			46,900
Dilutive stock options, restricted stock, and ESPP purchase rights	—			—			897
Weighted average common shares outstanding for purposes of computing diluted net income (loss) per share	44,429			46,281			47,797
Diluted net income (loss) per share	$	(0.02	)	$	(0.33	)	$	0.94

Potential shares of common stock that were not included in the determination of diluted net income (loss) per share for the periods presented because the impact of including them would have been anti-dilutive or because their performance conditions have not been met, consisted of the following (in thousands):



	Year Ended December 31,
	2018	2017	2016
Options	63	138	—
RSUs & PSUs	1,110	692	183
ESPP purchase rights	203	160	10
Total potential shares of common stock excluded from the computation of diluted earnings per share	1,376	990	193

The weighted-average number of common shares outstanding does not include the effect of the potential common shares from conversion of our 2019 Notes and exercise of our Warrants because the effects would have been anti-dilutive since the conversion price of the Notes and the strike price of the Warrants exceeded the average market price of our common stock. We have the option to pay cash, issue shares of common stock, or any combination thereof for the aggregate amount due upon conversion of the 2019 Notes. Our intent is to settle the principal amount of the 2019 Notes in cash upon conversion. The weighted-average number of common shares outstanding also does not include the effect of the potential common shares from conversion of our 2023 Notes because the effects would have been anti-dilutive since the conversion price of the 2023 Notes exceeded the average market price of our common stock. Only amounts payable in excess of the principal amount of the 2019 or 2023 Notes would be considered in diluted net income (loss) per share under the treasury stock method. We also entered into convertible note hedge transactions with respect to our common stock (“2019 Note Hedges”) in September 2014. The 2019 Note Hedges are also not included in the calculation of diluted net income (loss) per share because the effect of any exercise of the 2019 Note Hedges would also be anti-dilutive. Please refer to Note 12 – Debt of Notes to Consolidated Financial Statements for additional information.